Editor’s Note: If you are planning any retrenchments or redundancies please speak to one of our experts in advance. We have retrenchment guidelines and draft letters that will help you through this challenging process.
In this newsletter we have two articles about retrenchment and your obligations as an employer. In our first article we deal with your payment obligations in a retrenchment process and we look at part one of the guidelines seen as good practice by the Labour Court in a fair retrenchment process i.e. avoidance and reduction of the effects of retrenchment.
Note that you have to follow the retrenchment procedure stipulated by the Labour Relations Act, or potentially pay penalties of up to 24 months’ salary as compensation. However, even if you are unable to reach full agreement with your employees or their union, where applicable, you can still go ahead and retrench once you have completed proper consultations with them – and continue consultations even after the employee has left your services! Obviously, if you can achieve a signed agreement, this would be first prize.
Employer Responsibilities: Payment
Your responsibilities when retrenching include the following payments;
- Any leave pay; and
- 1 month’s notice (depending on what their contract says and how long they have been with you) (the staff can be asked to work their notice or you can pay them out for this); and
- 1 week’s severance pay for every completed year they have worked for you
If you do mutual retrenchments, that means you or your adviser will sit with each person one by one and try to get them to accept the retrenchment without having to go through the formal process that the law asks for, which is more time consuming. To do this you would need to offer more in terms of payment (e.g. 1 week pay or more) to encourage them to accept.
Good Practice Step 1. Avoidance and Reduction of the Effects of Retrenchment
Management is obliged to implement all or certain of the following before implementing any retrenchment measures in order to avoid or reduce the effect of such action:
- Reduction of the workforce through natural attrition
- Restriction of new hirings by means of recruiting and promoting from within
- Elimination of all casual labour
- Non-renewal of short-term contracts of employment
- Cessation of all overtime work
- Voluntary retrenchments
- Retirement of all employees over retirement age
- Implementation of layoffs
- Placing employees on short-time
- Demotion / offering alternative jobs at lower pay or status